(1) A monopolist with cost functionsells in a market with demandC(q) (9-8)3+188q+512q=24-p/50.Note that C(0) = 0, so the firm has no fixed costs.(a) What price pM does the monopolist charge? What quantity qM does he sell?(b) What output q" would maximize social surplus? What is the monopolistic outcome'sdeadweight loss?(c) The government decides to regulate the company and sets a price cap p. The govern-ment also offers the company a lump sum subsidy S if the the company stays and servesthe market. What price cap p maximizes social surplus and what is the correspondingminimum subsidy S that the government can offer to ensure the company stays.

First, we need to calculate the marginal cost (MC) of the monopolist. The marginal cost is the…

Answered: (1) A monopolist with cost function…

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

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